Despite being a growing reservoir of funds under management, this critically important pool of capital is confronting mounting problems collating and disseminating key data in a timely manner.
The ratings house is pinning its growth strategy on a revamped methodology that increases the emphasis on governance to 25 per cent – a timely move considering APRA’s proposed reforms.
Macquarie, AMP and CFS winners from China RMB reform
Macquarie Bank, AMP Capital and Colonial First State have the most potential to benefit from China granting Australia’s first RQFII quota last month, following the deal between the ASX and Bank of China which will allow RMB-denominated investments. China funds management industry researcher Z-Ben Advisors has analysed the new landscape.
In a report to clients – primarily big institutions outside mainland China, Z-Ben says: “The significance of the Australian RQFII centre is not very different from Qatar or Canada’s RQFII hubs. In fact, from an RMB internationalization perspective, it plays a smaller role because the RQFII opportunities in Australia would cater more to Australia’s home market rather than an entire region.
“Australia’s home equity bias is approaching 70 per cent, with the remaining 30 per cent of investable assets from both institutional and retail investors mostly allocated to developed markets. Therefore, we do foresee Australia’s need to increase diversification, with initial demand being driven by sophisticated institutional investors seeking aggressive or focused exposure and a potential long-term flow on effects to Australia’s superannuation sector…
“Turning toward the competitive landscape, Australian global asset managers who have substantial potential to develop their RQFII business are Macquarie, AMP Capital, and First State Investments [Colonial]. Macquarie, which not only has HK-based QFII and RQFII quotas but also possesses a QFII IBB license, is the most well-positioned manager among all three candidates.
“Having an RQFII license will allow Macquarie an additional channel to further develop its fixed-income and alternatives strategies in the region. The second most likely manager to receive Australian RQFII quota is AMP Capital, which has been holding QFII quota since 2006 and, more importantly, has a close relationship with China Life Insurance from its JV FMC (China Life AMP).”
Z-Ben also believes that banks, including the big four Australian banks, could benefit down the track. “Although bank RQFII usage is still in the exploratory stage, some banks, such as DBS Bank in Singapore and Bank of East Asia in Hong Kong, have set examples of using RQFII quotas for corporate treasury services. As time goes on, this type of activity could present a particularly attractive market for Australian banks servicing large Australian companies with significant China exposure, pending likely strong increases in RMB-denominated trade.”
ANZ and Westpac are likely to be the frontrunners, Z-Ben says, since they both have IBB access and having RQFII licenses would enhance their Chinese onshore capabilities on a broader scale.
Z-Ben predicts that the geographic expansion of the RQFII program will undeniably decrease Hong Kong’s role as an offshore RMB hub, since more managers can access Chinese investments via their home and multiple offshore markets.
